Wm Morrison Supermarkets Limited

Future Development

Morrison's is a major British grocery store with a history spanning over a century. It offers a wide range of products, too numerous to list comprehensively, but we can provide an overview of some of Morrison's ongoing developments.

Acquisition of McColl’s

On May 9, 2022, Morrison's acquired the trade section and a majority of assets of McColl's, a company specializing in convenience stores. This move aims to establish a robust platform within the convenience sector. Part of this plan includes a target to increase the number of Morrison's own convenience stores under the Daily fascia from 450 to 1000 within the next two years.

It's worth noting that McColl's currently faces financial challenges, leading Morrison's decision to close 132 of its underperforming stores as part of the acquisition.

Additionally, Morrison's is actively working on enhancing various aspects of its business, including supply chain, logistics, workforce training, and administrative efficiency, as they integrate McColl's into their operations.

Environmental Protection Policies

To tackle the climate change and protect the environment, morrison has joined the "Task Force on Climate-related Finnical Discolosures(TFCD) and the board had layed out the following task to reduce waste and carbon:

Morrison is committed to reducing plastic usage with a specific goal of decreasing their own-brand plastic packaging by 50% by 2025. Notably, they are the first supermarket to pledge the complete removal of plastic bags for life. To address more challenging plastic items, they have introduced paper bags as an alternative, which is expected to reduce approximately 3,200 tons of plastic waste. In addition, Morrison has invested in recycling operations through a joint venture with Yes Recycling (Fife) Ltd. This partnership is focused on processing hard-to-recycle soft plastics and has the capacity to handle 45,000 tons of flexible plastic packaging

Supermarket	Average trolley price
Morrisons	£342
Asda	£342
Tesco	£361
Ocado	£368
Sainsbury's	£371
Waitrose	£377

	2018 FY	2019 FY	2020 FY	2021 FY	2022 FY	2023 E	2024 E	2025 E	2026 E	2027 E
Total Revenue	22,479	23,534	22,416	24,727	23,310	26,807	30,828	35,452	40,770	46,885

Magnitude: Millions (M)

Discounted Cash Flow

The table below represented he Unlevered Free Cash Flow (FCF) data for Wm Morrison Supermarkets Limited from 2018 to 2027, the company experienced a drop in recent years (2022). The projected FCF for the years 2023 to 2027 shows increasing gradually, indicating that Morrison will regain its momentum in the near future.

Fiscal Year	2018	2019	2020	2021	2022	2023	2024	2025	2026	2027
FCF	345	447	529	NA	194	214	235	258	284	313
					Projection Year	1	2	3	4	5
Present Value						227	265	310	362	423

Magnitude: Millions (M)

Wm Morrison Supermarkets Limited has an enterprise value of 20,674 units and an equity value of 17,250 units with a WACC of 6.21%. The implied share price is 7 units, showing a significant increase compared to the current share price of 3.65 units, with a remarkable 91.8% change.

WACC	6.21%
Sum of PV of FCF	1,585
Growth rate	4.50%
Terminal Value	25,801
Present Value of Terminal Value	19,089
Enterpise Value	20,674
(+) cash	333
(-) Debt	3,757
Equity Value	17,250
Diluted Shares Outstanding	2,451
Implied share price	7
Current share price	3.65

Magnitude: Millions (M)

Sensitivity Table
		Growth Rate
	7	3.50%	4.00%	4.50%	5.00%	5.50%
WACC	5.21%	6.943521281	5.17055606	5.17055606	6.943521281	17.96682183
	5.71%	10.11775476	6.896522233	6.896522233	10.11775476	62.28769622
	6.21%	10.11775476	6.896522233	6.896522233	10.11775476	62.28769622
	6.71%	6.943521281	5.17055606	5.17055606	6.943521281	17.96682183
	7.21%	4.11841452	3.340505278	3.340505278	4.11841452	7.037923491